N.Y. Estates, Powers & Trusts Law § 11-a-2.1: Determination and distribution of net income

§ 11-A-2.1 Determination and distribution of net income

After a decedent dies, in the case of an estate, or after an income

interest in a trust ends, the following rules apply:

(1) A fiduciary of an estate or of a terminating income interest shall

determine the amount of net income and net principal receipts received

from property specifically given to a beneficiary under the rules in

parts 3 through 5 which apply to trustees and the rules in paragraph

(5). The fiduciary shall distribute the net income and net principal

receipts to the beneficiary who is to receive the specific property.

(2) A fiduciary shall determine the remaining net income of a

decedent's estate or a terminating income interest under the rules in

parts 3 through 5 which apply to trustees and by:

(A) including in net income all income from property used to discharge

liabilities;

(B) paying from income or principal, in the fiduciary's discretion,

fees of attorneys, accountants, and fiduciaries; court costs and other

expenses of administration; and interest on death taxes, but the

fiduciary may pay those expenses from income of property passing to a

trust for which the fiduciary claims an estate tax marital or charitable

deduction only to the extent that the payment of those expenses from

income will not cause the reduction or loss of the deduction; and

(C) paying from principal all other disbursements made or incurred in

connection with the settlement of a decedent's estate or the winding up

of a terminating income interest, including debts, funeral expenses,

disposition of remains, family allowances, and death taxes and related

penalties that are apportioned to the estate or terminating income

interest by the will, the terms of the trust, or applicable law.

(3) Unless otherwise provided by the terms of the will or trust,

commencing (A) seven months from either the date of death or other date

a beneficiary is to receive a pecuniary amount outright if letters are

not required, unless the beneficiary is a genetic child, then such date

shall be the later of the aforementioned time periods in this

subparagraph or the date of birth of the genetic child entitled to

inherit from the child's genetic parent under section 4-1.3 of this

chapter, or (B) seven months from the time letters, including

preliminary or temporary letters, are granted if letters are required,

unless the beneficiary is a genetic child, then such date shall be the

later of the aforementioned time period in this subparagraph or the date

of birth of the genetic child entitled to inherit from the child's

genetic parent under section 4-1.3 of this chapter, a fiduciary shall

distribute income to a beneficiary who receives a pecuniary amount

outright, from net income determined under paragraph (2) or from

principal to the extent that net income is insufficient, of an amount

equal to the pecuniary amount multiplied by an income factor, which

shall be set (or reset) on the first business day of each calendar year

and fixed for that calendar year at the target Federal funds rate as

announced by the Federal Reserve Board (or in the event the target

Federal funds rate is a range of rates, the high of that range) less one

percent, but in no event less than one-half of one percent.

(4) A fiduciary shall distribute the net income remaining after

distributions required by paragraph (3) in the manner described in

11-A-2.2 to all other beneficiaries, including a beneficiary who

receives a pecuniary amount in trust, even if the beneficiary holds an

unqualified power to withdraw assets from the trust or other presently

exercisable general power of appointment over the trust.

(5) A fiduciary may not reduce principal or income receipts from

property described in paragraph (1) because of a payment described in

11-A-5.1 or 11-A-5.2 to the extent that the will, the terms of the

trust, or applicable law requires the fiduciary to make the payment from

assets other than the property or to the extent that the fiduciary

recovers or expects to recover the payment from a third party. The net

income and principal receipts from the property are determined by

including all of the amounts the fiduciary receives or pays with respect

to the property, whether those amounts accrued or became due before, on,

or after the date of a decedent's death or an income interest's

terminating event, and by making a reasonable provision for amounts that

the fiduciary believes the estate or terminating income interest may

become obligated to pay after the property is distributed.